Nonprofit Salaries: Nonprofit Employee Pay From Entry Level to CEO

With approximately 1.5 to 1.8 million nonprofit organizations in the United States alone, the non-profit sector makes up the third largest employer in all the USA with one out of 10 Americans employed in the nonprofit sector. That’s over 12.3 million jobs according to the U.S. Bureau of Labor Statistics. And yes, that also means they are paid employees, not volunteers! Although volunteers make up a large percentage of staff at many nonprofits, paid employees are also a necessity as in any business.

So if you’re a nonprofit, it’s important to understand all the laws and regulation of having employees, and how they may impact your 501(c)(3) tax-exempt status. Then there’s all the regulations regarding paying your employees including federal, state and local taxes as well as any additional benefits you’re passing on to your executives. Or how much you should give your staff to stay competitive and slow down attrition rates. We'll go over all of this and more throughout this article.

Can Nonprofit Organizations Pay Staff?

Although many people make the mistake in thinking that all of a nonprofit's employees are actually volunteers and don't get paid, or make a very small salary, the truth is some nonprofit employees can make a decent living working with a nonprofit. And yes, nonprofit's pay their employees just like any other company does and even offer benefits and other nonprofit compensation. Especially in important full time positions and executive roles within the organization.

The employees themselves do not receive any tax incentives on payroll just because they work for a nonprofit. They're still subject to payroll taxes, including social security and medicare, federal tax withholding, and state unemployment taxes. But it is possible the 501c3 organization itself may not have to pay federal unemployment taxes depending on how it was structured, but a certified tax accountant or attorney should be called on for your specific circumstances. 

How Do Nonprofit Employees Get Paid: Fixed or Variable Compensation

Most nonprofit employees get paid just like in any other business, although there are a few considerations to take into account. Basically employees can be paid on an hourly (varied) or salary (fixed) basis and these salaries can be paid out weekly, bi-weekly or even monthly as long as there are no federal or local labor laws restricting these terms.

There are some positives and negatives or the two different forms of payments, fixed or variable, so you'll need to take each type into consideration and decide what's best suited to your specific organization. You'll also need to take into account any bonuses or compensation packages you'll be offering your employees.

Hourly Employees

Many part time and lower rung positions at nonprofits are paid by the hour. If you choose to compensate your employees by the hour or variable compensation, remember the federal labor law requires a minimum of $7.25 an hour, or if the local laws in your state command a high wage, you must comply with whichever one is the highest. That being said, the industry standard is around $25 an hour, a lot more than the required wage. It is also important to understand hourly wage employees that work overtime, more than 40 hours a week, will also need to be additional compensation at time and a half. This is not the same for salaried employees.

There is a balancing act as you want to compensate your employees with competitive compensation and not underpay them and get stuck with a high turnover of employees. Furthermore salaried positions aren't often linked to financial rewards based on performance which means keeping staff motivated and passionate about your mission can create other issues. You can consider giving more important positions added performance bonuses or additional compensation packages like healthcare insurance.

Salaried Employees

Salaried employees are often those in more executive or leadership positions or are a necessity to the organization like human resources. High level executives are often given salaries so that the organization can hire a qualified executive competitively while maintaining their IRS tax-exempt status as are other essential employees. There are a number of reasons why you might choose to pay your staff a salary, the major benefit being you don't need to pay overtime to individuals that work more than the normal 40 job week. For a nonprofit with passionate workers who put in a ton of time to the cause, this can be a substantial savings to the charity.

There is also the budget aspect for both your organization and your employee. For the staff, they know they will get their set sum at a specified time regardless how well the charity's finances are. For your nonprofit , you know the specific amount of compensation that needs to be covered for each month.

Bonuses and Other Compensation

Bonuses and other compensation packages like health care can help make your offer to potential employees more lucrative and help you retain current employees. You can offer incentive bonuses based on the amount of donations someone has brought to the nonprofit , or other forms of compensation. This is legal to do, but the is one important thing to be aware of. Now more than ever potential donors are researching nonprofits to see how much of their donation is actually going to the cause, or charity's mission. This means if you dish out huge bonuses or over compensate an executive, you may find donors shying away and thinking your employees are being paid too much. Remember, all nonprofits must make all of their financial data public. 

What Affects Nonprofit Employee Salaries?

The bigger problem today is in actually finding employees since the COVID-19 pandemic. One of the key finding in a report by National Council of Nonprofits states that, "Nearly three out of four nonprofits (74.6%) completing the survey reported job vacancies." This is quickly putting pressure on wages within the industry as the shortage leaves many key as well as lower level positions open for sometimes months at a time. This can be seen in this quote from the same report on how salaries are directly linked with unfilled positions, "...salary competition affects their ability to recruit and retain employees, followed by budget constraints/insufficient funds."

Then their are a host of other factors like the location of your nonprofit. If you're in Manhattan you're going to need to offer higher compensation than if you were in some small town in the middle of nowhere. Then just how big are you and what is your budget like? Furthermore the position and amount and depth of responsibilities associated to that position are all additional factors you'll need to take into consideration when dealing with compensation.

One thing to note here though is the IRS does give vague guidelines on what is an acceptable salary when it comes to your employees. And although their rule may be vague, needing to make all money spent on salaries open to the public in your financial reports is not. In fact, if any employee makes more than $100,000 a year, that information must be disclosed on your IRS Form 990. And people are looking more often at how much employees are getting paid as to deciding whether or not to make a donation. Those organizations that shady practices to pay their people unusually high compensation or benefits packages can find themselves loosing donors quickly. 

Nonprofit Compensation Analysis 

Nonprofit salaries vary depending on many factors like the job position, location, type of nonprofit and so on. But overall the average nonprofit salary for an employee is somewhere between $47,891 to $67k a year according to websites like Glassdoor and Payscale. But again, compensation analysis ranges a nonprofit will pay staff has a lot to do with the position as well as many other candid factors. But we will try to narrow down the average compensation of the most common job titles in a nonprofit to give you a better overview on the average base nonprofit compensation.

President / CEO or Leadership Positions 

The average salary for the CEO of a nonprofit in the USA is $186,406 according to Salary. This amount can range between $140,930 and $240,127 according to the same website. And this makes a lot of sense as your CEO is the most important person in the organization and their position usually requires them to have past experience running an organization as well as leadership abilities and other skills. 

Executive Director

An executive director may be the same person as your president or CEO depending on the size of your operation. Again, big or small, this person is usually paid more than other positions as they will need to have the skills required to run and maintain your organization. Payscale places a nonprofits pay at $73,174 with a base salary wildly ranging anywhere from $42k to $135k a year.

Program Manager

Your program manager is also an important portion within your organization and they are the ones that get stuff done as well as manage thoose with their specific programs. Like all managerial positions, you can make a good living being a program manger for a nonprofit. Payscale puts the average salary at $58,193 and salary ranges from $42k to $83k per year for this position.

Marketing Manager

The average salary for a marketing manager is $71,390 (Payscale) and has a wide range of between $48k to $106k a year. As this position is the person who markets and brings awareness to your organization and is also usually responsible for fundraising events and even public relations duties, it's a key position to fill.

Fundraising Manager

Your fundraising manager is responsible for dealing with your potential and actual donors as well as donor cultivation. Their job is to find and secure funding for your mission through events and applying for grants as well as new sources of income for the cause. The national average base salary is $60,399 a year according to ZipRecruiter and varies from as low as $16,500 a year to as high as $93,500.

Wrapping up

Nonprofits are having a difficult year finding people willing to work in executive roles as well as other key positions, so it's more important than ever to clearly understand what benefits and salaries nonprofits need to pay out in order to secure a decent workforce. But armed with all the information we just went over in the above article, you should have a clearer understanding of what it will take to remain competitive.

And speaking of staying competitive, one way to keep all of your employees and volunteers happier is to use one complete platform for all of your business needs. From tracking salaries and volunteer hours to creating fundraising campaigns and donor management, PayBee can do all of this and more making it easier for all of your people to do their jobs a lot easier. Sign up for a free demo here and see how we can improve you charity today.

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